Brevarte pace chert close 2007-T101-149-56-8T ‘Appeal (cv) 7128 of 2001 ‘SH Kapadia And 8 Suderahan Reddy 32, Parlament has tegsiatve competence to levy service tax on charteree accountants, cost accountants and architects - professional tax and Service Tax or: Kapadia 2 Is san appeal flee oy All ncn Federation of Tox Prastioners against she Division Bench judgment of the Bombay High Court dates 22.2.2003 in Wirt Putin No, 142/99 uptolding the tagslatve compecerce of Parlament te levy servi tax vida France Act, 1994 and Finance At, 1998. Accord tothe Inmpugnes juegment, service ta falls nErivy 97, (lst Tf the Severan Schedule fo te Consstubon, 2. The question which arses for deermination in tis civil appeal concerms the exrstiutiona status of the levy of servie {Ox and the legslative Eimpetonce of Partament to impose rerleetoe_dncer Arco 2e6(2) rend with fey 97 of Let lof tre Soventh Sched t9 see Constn'on. The ese Srsing nts appeal quesvone the competence of Priament levy service tx om pricing charters necountants and architects having reg9°e 0 EY {0 Ust I of the Seventh Senecule tothe Consetuton ane hrc 278 ofthe Consoeudem, Background Facte 2, On 16.1998 Hance Bil, 1998 was introduced in Farernent, Clouse 19 of se Notes sought svasttve Sections 65, 66 and 68 and amend Section 67 oF the Franc Ac, 1994 relating Yo service tax S026 levy 2 ax of services rendared Oy a practising chartered accouncart, cost ae=oUNae and Brent: toa len in profesional capacty 3: the rate of iva per cent ct Se amour charged to Se cllent, On 3.51998, Somoay Cnateree Accounts [Associaton made a reprasantaton tothe Central Government duocting tothe aforestated Bil. On 8.1998 the France Bil was hewaver passed ane the ance (No. 2) Ac, 1998 racelvec the assent of eve Presiden of Ina, The Act came Ino force wth effect from 14.1998. On 7.10.1996, Union of Inde Netieaton Ne, 89/98 Inter ata vaducng the scope of ta xamston. On 201.1999, Wnt Paton No. 142/99 was fle by the Federation inthe Bombay Fi car cstrgng ne vay trate farce. By te puta judgment ae 222.901 te RomoayHgr Cou rejected he wr pton Reason for Imposition of Sarvice Tax Ineivicuals et. Service sector contributes about S434 to the GOP. Services consttute heterogeneous spectrum of aconomle activities. Today services {var wide range of actives sucn as maragement, sankig, Insurance, hospi, consutancy, communication, seminstraden, entertaiimert, research Industry by Itself. In the contemporary worl, development of service sector has become synonymous with the acvancement of the aconomy. Economics Fold the view that tere Is no dlstmtion between tre consumption of goods anc consumption of services 25 aot satsty the Tuman Mees 5. In ne seventies, Government of Iain nia an exerise to explore aternave revenue sources cue to resoures constraints. The srimary sources of Fevenus are rect ane incract taxes. Cartral excise dy Is a tax onthe goods aroduced In Ila wnareas customs dy Is the tax on pars. The Word foods st oe uncertoua ir cotaautrton tthe word sie. Castors ard exe ay COC to ma" source test anes ning, ath te yes B43, the an Union inenca Hse todaced ie en ccep of ere tak by igaig tex on sels telephones, nie nurs 6. AL tis stage, we may refer to the concept of Value Added Tax (VAT), whichis 2 general tx tat apples, in principle, to al commercial actives Itvelving prodecon of goods and provision of services. VAT fs 8 consumption tax esis bore bythe consume 7-1 the light of what i stated above, I clear that Service Tax Is @ VAT which ip tur is desthaton based consumption tx inthe sansa that tI on ner etnies or ots age on He business tt on Be eonsumer and woud, sey, Be fevoble ony on services Powed WIE ie 8. As stated anove, service tx Is VAT. Just 25 excise duty Is 2 tax on value edelton on goods, service tx Is on value 2cetn by rendition of services. “harefora, for ur understanena, roacly serves fall ino two categories, rarely, property based services and performance based servcas. Property asea services cover sevice providers suchas afchtect, Imeror designe real estate gems, constuclon selvies, Mardapwalas ele. Performance Doses Serves re series ales by sevice Proves Ine sero’, practising chaieed scout, prcrang con scout, seey 9. Government of tncla In orger to tap new areas of taxation and zo Ider the ridcen one appontes Tax Reforms Committe unger the Chalrmarship ot ‘i Challah in August, 1991. The recammencations made by toe Committee were accapteg and te Service Tax was intocucad inthe Budo or 1994-95, Sroughhe Pan At, ena ed eect Surv Tox he on as Servs poised oe tobe sola Aer a oan he ‘Amendment Act, 2003, which provides thet taxes on services shall be charged by Union of india end shall be soaropriates by Lion of Ingia and the Soins. A nem Estey 92C wes ale Introduced In he Union Uist for te levy of lnees on services. Section £5(16) ot the Fence Act, 1994 provided fotaxable sevice bosed on gross receipt. In cates where vale f taxable service could not be decided then the cot of providing the service constituted the bovis ofthe asessable vale of taxable secs 11. At this stage, we may state thatthe above discussion shows ‘het what was the scanome corcep, namely, that there is_no eatincion between zraumption of goods ard consumption of services Is ansioed ints Tegel principle of taxation by the sforesated Fnance Aes of 1994 and 1998 Scheme ofthe Ponce Ret, S998 9nd Finance At 1996 12. Choper V ofthe Finance Net, 2996 refered to Service Ta. Ik defined assesses to mean @ person responsi for collecting the service ax. Under the 1Aek Sevice tox wos defined to ean tax chargeable uncer Chapter. Under the Act table service woe defined te mes" ony svvlee aoviced by 5 Sodkctroker to an investor n cometion wir the sale or purenase of secures listed on 8 reccorine rise sxchonges services rendered toa sonerier by he telegraph autory, and services rendered by an inner ta a policy Naler Under the Att wax lorifed that words and expressions not sels n Chapter v but osed trere'n aval bear he some meaning bs given inthe Cental Exize Aer, 1942. Section 66 sited that series to soll be levied ge the fate oe per cans ofthe vaio of saxnble rervlens proved to any person by the serves provider who wes responsible for caleing the servic tx. Te ‘toe sini to Section 3 of Cental Excise Act, 194s, Secon 67 deat ath vahiston of taxable services, Section Of desl wits collection are recovery of ‘hives tae, Seeton 7: dent wits aseesemert, Scion 72 esfe wits next jgmentsssestment. Secion 73 deat wisn voice of taxable sorvces escaping sssessment, Scion 69 itor ala sind tat Section 3C, 9b, 110 st. of the Enrol Exesan Act sll appW alo to olleclon and recovery of servi sk FRirsner may be stated te the administration of service x ie given to te Shores under the Cereal Exige Act 1, Stony, tothe same effect isthe Finance Act of 1998, Th said Act has inernared the Int of notified servicns 50 as to include advertising egencies, Aravel agencies, architects, colerers, clearing ond forwarding agents, creat raung agencies, eastomr Rowse agent, precinng chertees gecounants, Drochsing cost accountants, reat estate agents, secury agencies ee.” We are caneervea in this cave wity the services provided by architects, chartered ccountans tnd ost necountons covered by he Farce hl, 1988, Relevant Provisions of the Consttution of inca 1, The relevant provisions ofthe Consttaton of Inca are a follows Aricle 246. Susjctmater of lowes made by Pallament and by the Leglsatres of Stes. (1) Notlthstancing anything in clases (2) ane (3), Parliament ow excunive power to make Ios wits respect to any of te makers eromeratew im Ltt Lin the Seventy Semele (im ts Constvon referred 9 he Union use rile 265, Tones nt to be imposed save by suhorty af law. No tax shal be levied or caleied exces by suthorty of low ‘ticle 268A. Service 12 levies by Union and eallected ans appropriates by the Union and she States (1) TeXes on services shall be levied by the {Government of ina a5 such tox sal be cllected and appropriated by the Government of indla ane the States Inthe manner provided in clause (2). (2) The proceeds in any financial year of any such tax levied in accordance withthe provislons af clause (1) shall = (@) catlectes by the Gavernment of ale and te States; (©) apprceiated by the Government of Inca andthe States, In accordance with Such principles of collec and appropriation as may be formula:ed by Parliament by lw ‘tile 269, exes levied and cllected by the Union but astgned tothe States.(1) Taxes on th sales or purchase of goods and tense onthe consignment of goods shal be levied and caleced by the Goverment of Iie Bt shall be eisigned end shal be ceemed la have Sean assigned to Ue Slates oh 0" ner the Lat day a Apel, 1996 Inthe manner provided in clause (2) Explanation. For the purposes of is class, (2) the exarassion “taxes 2n the sale or purchase of goods" shall mean taxes onsale or purchase of coods other than newspapers, where such sale purcnase takes olace inthe course of Inter-State ace or commerce (©) the exoression taxes n the consignment of g20cs" stall mean taxes on the cons'gnment of goods (whethar te conslnment Isto the parson making Wor to any otver parson), where Such consignment takes place inne couse of nter= Stata Vede or commerce. (2) Te net proceeds in any tnanclal year of eny suen tax, except in so ‘ar as thse proceecs represent proceeceateibvtsble to Unicnsertoie, shall ot form part ef the Consoldatec Fund of Indo, fut shall sa assigned eo te States wien whch that tax le tvile in that yea, and shall be dswioutec mong these states in accordance with such princes of astrbuton as tay Be ferrulatea by Parlaret by le. (2) Paniamert may by taw formulate principles for determining when a sale or purchase ot, er consignment of, 900d takes ace Inthe couse of Iter- State ede or commerce Article 276. Taxes on professions, trades, catngs end employments. (1) Notwithstanding anything in arte 236, 90 law of te Leaisibture of a State Foiating > taxes forthe bono ofthe Site or of © munclpaty, cleric bear cal board or othr local authority therm In respect of professions, (vades,calings or employments shal be nvalié onthe qroune tat it relates tos tar 99 ncome, (2) the wal amount payable in respect of any ove person tothe State oto any one municipality, sic board, local board or eter local authority lathe State by way of taxes on professions, rade, callirgs and emaloyments stall nt exeaed "wo theusand and five hundred rupess per annum (2) the power ofthe Legislature ofa State to make laws as aforesal wit respect to taxes on professions, trades, callings and enploymenss shall net be enstrued as Imiing Ih any way the power of Parliament to maka laws with respect eo taxes on Income accruing from or aFsing ut of arofesions, ‘aces, callings and employments Entry No, 92¢ of Lst ofthe Seventh Schadule tothe Constinton sa fllows 526. “axes on services Entry Nos, 53, 60 ane 62 of List of she Severtn Schecle t the Consttiton are 9 follows 53, Texas on the consumption or sae of elecricty, 60. Tones on profession, traces, callings and employments. 62, Texas on locas, inching taxes on enterianmants, amvsements, batting end gambling Arguments:he sae enry rere to txer on profess ona, tases cllngs ana employments. Tne argument sevarced by Shri Shyam Divan, feared couneel on seh oF the appolon, was that avery eety Inthe Lis n he Seventh Sehecute rproperts a held of mgiiton. Therefor, srould be reed Inn brows sons. She sppellans vi mot Sapure before te toa propo tat the series tax mesa ax on eerice and thal I wae no" a tax on the service providers. The Basie contention ofthe appelant was ta: the State Legtlature slone nas an absolste jnscieson and leaislte competence 9 levy servi tok 1k WOE Submited thet service ta wasn thx on profes. (twine submitted that service tx fll tin the abt of ery 60 9 Lise femme suomi tat the ‘wore profession in te said ony tae not Imi by any reetcron/aualention ave, thererore, t must be read wits tne w dest possible sone. wns Hbnitee ‘word prefesion has been defined In Blacks Law dictionary to mean’ vocation requiring aavance ed.caton and fring. Ke was Eubmite tht oe wora provession nas been dated n the Exgish deinary By Cals to mean an occupation requlng special ealning Inte bral Sr for sciences, especialy one ofthe tore learned profession, law, thelomy, oF mecicine. Ir was eaeendea on beta of te appelants tat sere was To Aiterence between tax on profesion ard tax on services, Accering to the learhes counsel, te word profession In Entry 0 Lst I was synonyms wth the word service and, therstore, nw on profession wovldielide so on service, wich tox Cold ge kvied only by the Sate Leg slsure- wat svpmteee (ha: there cannot be @ profession witvovt service. it was submited that sarvce rendered oy a chartered accouwane/cost accountant his clint Is he Survcerandevad as 3 professional. I: was urge oh Beha? of th appear that twas no: the case of te appellant tat serves cannot be taxed. me oly Sroumene avanced ov behat ofthe agplia% wax shat te tox 95 profesion was the State Eee ang, teres, Entry 97 of Ltt epnnot be nvokee Bnd that Parliament Rad no leisaeye competence to levy service tx. fe was submited tat under the France Ace saatilty wae |mitas to rendition ot Droessioatsorvces and, terete, ak on arofeston vnge” eney 60 of Ust i? wocid Include fx on Service. inshore, aesoreing tote lene cone, {ha word aprofesson! im Erry 60 of Lit It was nothing but sarvce ang, therfore, Ivy of se"ved tax carve wit the compete of State Laila lone. Pacing Fellance on Article 276(1), learned counsel on Beha? ofthe apselas submited that the Words Used In Arle 2761), rare, no law of {over every aspect connectad with it hat tha word sate was Pot an aspect of the wore profession I was Infact synonymous to ach other; that they ‘were Insepareble end there're, ta¥ on services could be levied only by state Leglslaure. Learned counsel urge that te expression Felting to andthe persica he css wh ave te fo eyo! ts oy tenon calle cod tha ora paso, ace cans irmer incorporating ones on preston under seouat Lagstlve Hand Actordng fo te ened Curl therfore, tha Cor man give we ‘le in Arie 276(1) indeate smpitude andthe wide fild apen tothe State Lepiature to mace laws imposing taxes an pressions, traces, caloge ete Kno urge ht te above io egress os, rey, reli adept are cnn new fs otde of mies site ar te Signa shoes ht de meghtage ie geno the ores sno expenins ter the nord profes n Arle 276) ard ry 6 of Ut Ht nous cove ‘he core at profession, tsorned counsel submitted that if te above two expresions in Asie 276(1) are gen due weishtoge then tere would be ne ‘ference besneen the worse profession and serv ces that these two words wou be inerehangesble andi sed Irterchangoaby, is clear thet the State Relionce was sizo placed on rile 276() in support of the canterion that she Consetton elf had made 9 ihotomy betwaen taxes on profession; trader, calings and employments none hand end taxes on Incomes arising ov oF arafesios,trases call gan employments onthe ater an th the anid dectomy bolwaen tar on profession {eurvice) vise vis te tx om incume arising out of protestone, bodes, caliege ete. teh indcabes that © *xparate lees demarcate for Patient to enact Ines imposing tox on Incomes arising sit ot prafesions an, toa same Ue, the Sate Legiltire Sone shal Rave te competence to impose tox on professions, Waees, canes ete 16. Shri, Shekho, learned senior counsel fr the Dnperimant,plecing clianes on dgments impuene of varius High Cours, submits that sorvica tox ‘essentially 9 tax on the professional anc, therefore, Parliament had the legislative competence to levy service tax uncer Entry 97 of lst t. Tt was further Submaise that with the Constuton (eghejelgres Arvendmant) At, 2008 oy which ery 92C Is isartad, the controversy is closed and, thavafere, hare IS question of going sehnd the sale entry which has accepted tne vaiy ofthe impugned jocgments ay Cansttonal Amenervent findings: (1) Meaning of Sorvice Tax: 17-s sated above, the source ofthe concept of sevice tx les in economics tf an economic concept. It has evolved on account of Service Incus'y becoming a major contrbutor to the GDP of an economy, partculrly omlodge-based eearomy. With the enactment of Farce Aet, 1984, the Canal ‘Government dorved is authority favs tre resicary Erry 97 of thw Unton Ust fr loving tx a survicee The egal backup wos farther provides Oy the ‘rirosoevon of article 2668 mene Conatition wide Consotwon (eignsreighth Amendment) Ack 2003 wrich mated tae toxes Ov services anal Be charge bythe Contra Goverement and azpropratesbetweon the Union Government ane sha state. simetaneausly, a new Ext 82 wor tleo introduces noe Union Ust fr the levy of service fax. As state above, gs an ecoromiteconceb, Mere Is na essneton between te corsumpt en of go0es and eansumton fof sorvices as beth sobsty human needs IIs his economic concept Seaed on te legal pancple of aquvalance Which now sands Incerperated Inthe CConsittion vide consttuton (Eigrtyaighih Arvendront) Act, 2003, Furth, t's important o note, that sorvice ax ea vauo added tax which In tun Is 3 Sonera tox wien applies to al commercial actvties nealing oredieton of 99002 ane prvison of sevice, Moreover, VA 2.9 ansurmpon to 9 Boma by chen 18, In Mot! Laminates Pt. itd v. Collector of Central Fxcise, Armecobad 1995(76) FAL7.261(SC) = GoamaLauecce) we gst a che of an important Drncpie, nam, principle of equivalence. in tar ucament, ths Court was requred fo cepa the words excsaole goods and areducse or manufactrec [fiage ned by this Cour that se expression excleable goods hae Deen defines in Section 2 of the Corral Exese Act 1944 to mean gooce species Inthe Schadule, t was hele tat the sec for having 2 schedule in te het was tox rates under erent entiesnchding“esauary every, At this stage, we ‘may say that the object of the France Acts also to fx fates of ay under ferent entries. owever the asUon Which arave before this Court Mot {Gminatas (supra) was tre meaning ot the word goods in Central Exclee Ac 1944. ‘mis Court novece that Secton 7 of te laed Act levied duty on all txcsable goods mentones nthe sehcaule provid they se oroduced and “hanutecured,tarefor, the Cour laid down the test tat where godde are Specie ine Sched ay are exinele goo but wer auen goes can be sbed to dy mould aepend on weiner ey mare resid ‘his Court further explained that re exprassion produced or manufacured wouls mean that the goods produced must satsy the test of ‘lleaity/maraasablty. Te reazon boing that te duty under the 1944 Ac ls on manuacture/proaucton butte mantacture)producton Ys intended for Ekin ath ea th mara ov sl nas cseret ht te svlve ebonf vyng acs sty Hed ih poducon or martes a he We quote hereinbelow pare 7 ofthe sal jucgment, whlch Is 2 follows: ‘ale suthe a nai. Th ay eon marae pfu Ste poss ranifacre eared he ag Such ond 08 harofore, evan fan tm is manufactured or produced It wil noe fll nthe concept of good til the tes of marketbly Is salsa. In tha case of Mot! Laminates (supra) tne Soluton was on intermediate product produced inthe course of anufactte af lam Meted sheets. had a shot sl ite. 1 Was ot ‘marketable, erefere, tha Court took tne view that the sion was not gocds and, tharetare, not Gulab, 19. The Importance ofthe above judgment ofthis Cours twofold. Firstly, applying te prndple of equivalence, there is no dflerence Between producton or Tanacire fsb ode a paccon of maces serves ne form ofan ay udetaken by te sere ree Service tax, which has rece'ved lege support inthe form of nance Ach 1994, To give eh lusration, an Event Manager (ertessional undertakes ananager he is hable copay the to ov profession, cling or tase uncer Enry 60 o¢ UI However, tht tax er Entry 60 Ust I mil not cover Setuity sf ergoniring shoves for consiceravon which provide antetanmor* "9 the comsasroure Fr sper ahow he plant and creates baete on Mel, Siperiesen and rlnig. In gen Show he unertaies an acy whieh I commensal and amen ne places be‘ore hs suclene fore consump on. Toe Io fon service(s levied for eoen show. This stuston fs very siftfyr te a stuaten Where goods are marcfacture or produced with he Inemtion of Being bf services ae both eatiry te noman need in he case of Internet Service Povicey, service fox Is levlaple or one informatan and carasaee provides by web ses But ne service tay Is owabla on E-commarcs as thare Is no Database Access Ieviable on services provided within te count, . (0) Object of enscting the Finance Ret 21. Fnance Aes passed every year to fx the rate of tax. Ths Is the primary objet for enacting the Finance Act Bu it doesnot mean that a new dnc {harge cannat be nia by the Finance Ac for exemple, whats nak neame under sve Income Tax Ae (If Ae!) car be made neame by the Finance ‘hc This however sje tothe nance Act complying wit the Constitutional lm talons, AddRiel tax revenue an be calle ether By Increasing Set yy a sn hrm vis Sr im of the Finance At may ether envance the rate 9° levy fresh charge. The Finonce hei ta the tT Ac, 1961 andthe ennunl nonce Ace ore evacted by Porloment exersse of the poner eavfered by Arcle 246(1) reaa with Entry 62 fF st it nae further nel thet though Ke wes uneonvensonal for Parlement to smend the xing statute by Incorzoratng te amescing provision Ian Det ot 3 torent pith and subetarc, suey course would nat be vnconetetonal was held mat though the Tt Ace, 196) wae > permanent At while France Acts ara passad every year to presenba te rates at wren the tax has been charged under the TT Ack 1962 self WU Rot mean that Pew ane lasunet charge cannot be trveusse under the Finance Ack, Therefore wna le not nese under the IT Aes 1981 can be made income by 2 Fans Act Simiary a> exemption granted by tre IT Act can be mitran by the Fngnce Ack. Smierly,subyect to ConetstonlIrmtatons, sdeconal fae revenue {ould be colectad by enhancement of the rata of ax or By the levy ofa fresh charge vde the Panes Act. Parliament, ehvoug” she medlum of Hance Ack, ‘may de wrat tne amenemert fo the 10 At, 1961 by 9 separate Arencment Ac, car co. it was further ela that, the Finance Act, though annual Aes, °C Rot secessariy tomperary Acts as ay may coven provisions of a general cheracter whlch are of permanent azerauon. Thus, Parlame"t ls compete: Introzuce a choraing provision na nance Act nthe sale judgmars, nae been further held that even an sddeonal charge (sucrarge) can Be levied By 23. Te aforestated sudgrent was inthe contest ofthe IT Act 1961. However, the ratio f sat jucgment would apply equally 2 the France Acts enacted Annually for ennancemars oF tne rate of excise duty by levy of 2 Vash charge under that Act. Apalyng the test lle down Inte aferestate Jucoment of ths Court, we Role theta new charge by way of service tax or tax on savvice came to be fviedstatuterly by the sald hance Act, 1094, Whe” Ras Subssquenay atlned Constuional status by vtue of te Consteaton (eighty-aighth Amendment) Act, 2003 i 26, Constuonal aw, tks taxing law, essansally concerns concepts and pines -eetaton of Taxing Entries inthe Seventy Schedule to the Cont 25, Inthe present ease, it has Dean vehemenly tged on ena of the eppllant tht Ieglslive Entvies In the Seventh Schedule are lessatve heads/selse nd, thervore, they shove be gwen widest interpretation, Tore i no apste rogsreina sve #31 proparivon, weve", tere are two gFOUDE Frenics In ech of the tree Listen the Seventh Schedule In st Exvies {co 8 refer to several matters over whlch Parlamet has authorty Tecllte. But nies 82 to 92 enumerates ‘he taxes which cule be Imposed 32 law ot Parliament. An examination ofthese two groups of enles shows Envy 22 in List { refers to Railways whereas Entry 89 refers to Terminal taxes on goods or passengers, carried by railway. If Entry 22 Is construed as twade and commerce mith foreign counties and which refers to import and export, to be ilerpetea 26 Inelucing ses of customs ner that EN, they 9 wou Ou ener spun. Say. ie a onde Un Trl to incorgraon.replaonsné wig vp 0 corpualens 26, Turnog to Ust 2, Entree 1 te 44 form one group mentoning the subjects on welch Sttee cole leglsat, tree 45 to 62 In that st form net Under envy 18 then entry 45 would be rendered supervous. The above analysis Is hot exhaustive, Hewever, Be above analysis snows that sxation i not Intended a be campram ag m tha Meln subject IM mhicn an extended constucion can be given os Ue: lest cannot be epplied Lo taxation. Taxing envies are aisunctenvies. Tmis lstinction between the abovemanoned two groups of entries le also manifest nthe language of Atle 248 causes (2) and (2) 3s also inte language of sry 97 n Ust of the Sevents Schedule tothe Constluton, [See MPV. Sunaararaiar & Co. v. The State ot Anahra Pacesh Snd ane AL9SSSC¢E8 pare 32) 27. The above astncion between the group of general entries and the group of taxing entries sb the sts in the Saveren Senedute has also been Honan cet Souter Paracas & Cmax ate of eae ranted (193) # SCE 39m wh the Cav ok he view tat Enoy Sas 2 general entry whereas Etsy 88 Ust Iwas 2 taxing eny. Tis astncton Nes Been brosgt to light n another judgment of Wis Ceurt to tari one of v5, Kapacia, 3, was 9 party nthe case of State of Bihar a are. v. Seve Baleyanath Ayurved Bhawan (P) Ud. nd or. reported in (2005) 2 ‘SC 982 para 38), whichis quoted hereinbelow 28, Before conclusing, we may point out that n the case of Southern Pharmaceuticals & Chemicals, Wichur end Ors. v State of Kerla and Ors (3981) 4 ‘ec Soi tis Court has tke the wien, which we have taken hereinabove, In that case, tha Count held, that, by enaconent of Medicinal Act, 1955 by ‘reremahasize the wore "ann the the mand, when we refer ts Ercy 8 Lael, whieh isa general entry, relating to “intoneating lnc", we eter to 3 \mder ectvy, Toe words "in respert of br the words "wits respect to" used inthe forested jagrment im fe content of Esty © Uae Tl bring out the above ‘ference, Evry 8 List en entry on general noc unike try Ba Ustll whieh deals mh taxattn, Keeping nmin te diflrence Between the tw, ‘ne bold thatthe State Ia under eney @ Lik evers wider eld of se, consumption, poseeston, version ete. vinsale ty Be Lit, wheh deals ‘nen ary on manufoenire of medicinal preparation, ae such, This diference tz fst 0h af by sve Wigh Cast in the impugn Sossment, emphas's Sipbtee) 28, plying the above tests [nd down inthe oforestated judgments tothe facts of the presen case, we find thet Entry 60 of List I, mentions Toxes on profession, trades, calings and ermploymerts, Evey 60s taxing etry, Rs at 8 general en, Therefore, we old cht tax on rsfesions ete, Maso be reod a's ey on professions, ager, clings etc, a8 such: Therefore, Eiry G0 whlch refers to profesione cannol be extended to Tnslte services “ise whot is ealed as 97 Aapect Thoory, if te arsureent af the appelints is aczepte, snes there would be n9 ference netee” Interpretation 99 Several hry bee tntergrctation of staxing enb'y im Use Ted Ls i ofthe Soventh Schedule tothe Carattuton, Therefor, professions wil et eke Ecrwices under eny 60. ror the above Feasens, we hole that Parliament haa absolute Jurisicuen and legislate competence to fvy te on services ‘Whe reerprsng the fgislasve heads uneer List Il, we rave to go by schematic iaroretaten of the trea Lists m the Severth schedule fo the Censtution ard not by actonary mearing of the words profession or professional as was sought % be argued on peal ofthe anpelncsoenerwise the istncuon betwean gevaral envi and taxing envies unde” the three Usts woula stand obliterate, The words Inflation te and the words with Fespec © fare no doube words ot wise amplitude tut one Fas to een in ind te contxt In Which hey re used (tv) Meaning of tre words Taxes proessons:29, As stated above, Entry 60 ist 1 refers to tanes on profession et, 1s the tax on the individual persorfirm or company. Ris the tax on the status, A ‘Chartered accountane or 9 eos ocecurtant obtains 9 leenee ov Srvilege from she compete Bacy to procese. On that prvilege of sen the State = ‘smpotnt to lov 2 tax under Every 6. Nowovey, ax stone above, Ext 60 fe hot » gona entry connote rene ta Include every activity anderen by'a sharteree secoumnt/eoet aecumtanvareniee: for consideration. Soricy tax ten tx on enen Setwty underisken by a chorered Serountam/cos Bccountare or an architect, The cost accountantjcnartered sccountantrchiteetcrarges tes cent for aevies or or aueting of accounts, im ll, cost Secountantchargor nis ele Yor ace ht wall 9s dolng te work o¢ coring. for each tranenwon ov contrac, the tharnroa accountnt/eom accountant Fenders profesional based services: The acy undertaken sy the chrcere account or te core sceountn or an architec has tuo aepec. From he pot cf view of th enartved aecourtanvesstsccourtart fe an activity undertaken by him based on hs performance and sail, But from tha point of “ew of he cent the emoreeree accountne/eostseccumtan Ris soruceeprovger riz taxon snrlces. The actly undertaken by the cxareree Accountant or cost accouneane 1s srr te 3 saleaole or marketable commodises produced by the assessee ard cleared by the assessee fo" home Esrsumpton under the Cartal Excise Act For each contac, taxis loved under tye Brance Acts, 1994 and 1998, Tax caret be levied unde” that Act ‘nth service bang provided whereas 9 professional tx unger eny G0 e 9 tax om hs stave: Ile he tax am the teats of» cont accountant or 3 Chavtaraa. accountant. As Tong 26 2 persow'm remains In ta profession, rat has to pay professional tax. That eax has nowung to do With he ‘Smmrclal activities wnicn ne ungerauee for ns cine, Even she choreres aecoumant ha no work troughs the aceowntng Year reins hae 9 29y Drofesstoal toe, He nas so pay tre tox sil ne romaine inthe profession, Is the aot ane scope o¢ Fry o2 List when ='8 taxing erty. Tmeretore, Ene 60 contamplates tax oh professions, as such. Ert-y 60 List rvers to Tax on employments. In ova case, sa question arese whether Parlamert Was Incident of employment and, therefore, Parliament had no legislative competence to impose income tax under Enty 82 of List and that the State Uigisioure alone haa absolute jursdecion to make bw Imsosing tx oh pension Ths argument was rejected onthe ground tat Entry 60 of Ust I refers ‘retirement, he c2ases £2 be in the employment, therefore, on retirement the receipt of pension consttutes income In the hands of the pensioner and, Uheretore, Parlamert Nd legislative competence to enact income Tax Act, 1961 uncer whlch pension nas taxable 3s Income. Tris example demonst ates Se Iau of he word aes 0 feaens, clin cade an elements, ao cats to apts ofthe sme fey rare, pein. Ore the sppeant tat tne w dest posiie interpretation shouldbe eien the wor profession ia Entry 60 List TL We have to kee in mind while interpreting 3 nthe cate of Western inal Theatres Ld v Cantonment Board reported In AK 1959 SC 52 te applant wat a public Hed company, R wat 2 1Soun acne fours tna ans ocean in Ame os acs ne splat oy ne aoe bx ea ec Ihc ac 98 (6 30) een cy Seale the ev alr ha poe toma im reset Tes oy iy fax euhorse inp oft on sssesecapesons to provce eketcnmens &- amusement Acree te appears Wena nae Testes prevent cae end wich rafered tans on profesor, aden, cling end employment Ths avon sdranend on Doha of the eppelrt wes rejected ‘wos rot possible to differentiate between the enterteinment- provider and the entertoinment-receiver, I wos held that entertoinment was ede or celling SCwvesen ine Theses a Garters, te tak tmpared ch ertetalnent unde the Gavoenert Act come min Ey 30 cre Prone Use The porns of tle hopmen Hes the fa tak WIE ogg mater 8 Beictlon vawcen ae Impose Tore ping of carving or any tae © Slina'en tou bard ss tn 90 svery show tt tsa on ereryncree af he anarcce af lm parle eee or cllog Twas eld a tare tos ro thome there was no tox R war orersbrcved that © myer fst py tart take ou eter respetve of weer he sual proces or ‘or, Tot aes tay forthe prvtege of having te ng to exe'Cots te prfesvon and when he person aking ou tne Heres chooses to dos. mae fla tat he mand oe of ent anes fvied oy ta Caconnen Board was ax onto ac ot ertainment resting a tow a, terete, he pushes ow tapes x on errant el uncer eery30c the Pavincal Us n schedule Vt tote GOK AE 099 nd ok under ry a (ear to Lary 60 of Use). herfre,K warned tat Sony Légstture had ower to snact ine lan Vnpsing fax on creat les nadetnn9 oo wich te aw imposing tax om the orvlege cf caring on ay poession nce or caling under Srey se. cart En e0 of Ut inthe beset Case) “mercer, tne cout has dared tne cototy batwesn tex on prvlege of eaying co any ade or cating none hard and te taxon the Gite eterre tom tx on service Keeping In mind te aforestanee ony, fe cea tat tax ov srvice dove nt ta nde erty Lit I Serefore rariamant hes sbsote felon and laste competence to aa ne fw impeing tak on sevice under En 97 Ust fie Seventh (0) Staniteance of artite 276: 31. Learrac counsel for the apgaliants i support of his argument th ‘question of leglsatva competence of she stat. Legere Una the words orofassions and services are synonymous forthe purposes of daciing the Envy 60 Lis I, placed heavy rellnce 0" Arle 276, whien Ras been quoted 42. Article 276 corrasponds to Saction 142A of tha GOL Act, 1935, Howaver, under 2 lage numberof laws enacted before tha 1935 Act cams into foes, ower was conferred ov local Governments and local autores to Impose taxes om certain acuvites wnicy breacly came under the Heads T3xes on Drofessions, wads st. on one Rand ana Taxes on ieame onthe other hand. This resuted Inthe enactmant ct Secuon 142A by Britsh Pariamert, eh avec tha power corerred by prevensting laws. Impose tax on professions, callings atc. but Iited th amour payable to a spectled amount. At that Sire) was Re 0.0, uch vs be tax payne on proteson ther nes n 935 Arle 276 na, taetr, peta by Secon 242 ote GOL AC Is nat to amen that sower bur to provide tat such tax on professions, Wades te. shall sat be fvalcated on the ground that ft relates to a "OX of Ieome. Ones the Slate seeks to exercises ils power under Entry 60 Lst fl has to cma withthe provisions of Arle 276. Wheve, hewtever he txereise of power bythe State overlaps with ite power under some other Esty, War the Umitavon unde” Arle 2762) shall have no relevance. Ths, rile 378 fil rt ply to levy fax on Greamstanes and rns wh i fterele Wo ery #9 and Ene 60 of Unt and sant her Rehe Legato meke ws or pean of oxen rfesaon, forte ert of te Stet, Munipy tc Boer et. by sang tt such ew shall bute receives an tmount oF pension that receipt constitutes hs income though might be for pas services from envemplaymenty Ene ine Us have nen ied is a Group, ona deakrg with gaara sj ond hr ent with taxa, Te tes Selig ith avaion the scape ofeoch of the entries inthe thee Lists Inthe Severn Senedule to he Carstzion, This doce of pith and substance “laws Irom the words rile 246(1, austec above, seme, with respect to any of the matiars enumerated In List The satiom line ofthe sid coc fs to Isok atthe Tegisltion 9s whole and IF ens & substntal conneceon withthe Ertry, te matter may be faeen to be lesson an the Tople. That Is why due Wweigetage shoule be given t9 te worce with respect tom Article 246 a5 brings im the doctrine of oth and substarce for understanding the scope ef Teglstave pamers. competonca to legislate flows from Articles 245, 266 and te olhor Areles In Part RL. A legislation Ike nance At can be supported fone bese of somber o* nies, Ine present case, we are concerned wich the Conseutonal satus o¢ the levy, namely, service. he nomenclatre of a owy isnot conclusive for deciding its ue character and mate. for daciing the tue charetar ard nature of particu ow, with feforenes to the legislative competence, the court naz to lok Into te pity and substance oF the Igilaeon- The powers of aelamens and State Legislatures are subset to Consttttnal imitations. Tax laws are governed By Part XIl and Pa: Xl Arle 268 rakes In arc 295 when Ie ays "ae CMetax shall be levied by the authorty of law. To repeat, various entries inthe Seventh Schedule show that the power to levy tax is rested as datnct racer for the purpose of legslabve competence. Ths Ts she underlying piniple to efferent between the two Grove of enris, nomely, general Unvies and texing emior. We are af tho vw that taxes on sowie tm aaron aunjec ar compared to texas on professions, radnay salina oe “hevefore, Entry 60 of Ust Il and Enry 92C)97 ef Uist Loperate mefrent spheres (1 Discussions of Jucements sted on behalf oft appease 34, In he case of Godlrey Philips Indie Ud. end ane. V. State of U.P and ors. reported In (2005) 2 SCC S15 = (usmotsscLc the Sssessees/opplionts, no were ether manufacturers, deste or sellers of tbaeco, had chllenged te levy of lxtry tox Oh fobeeco ond toscra Dros by testing them es luxuries wn tre meaning f the word in Eiry 62 af Ust 11a the Seventh Schedule to the Canststion of Ind. User Procesh Tax on luntries Act, 1998 and cera sther State enactments imporss unary tax an tobacco by testing tas Tukury within the meaning ofthe ‘nord in Entry 62 0° Lis it wa hel by Sve Contution Gane of ti Court tat tne word lucie in boty 62 Lt il refers 9 etnies oF eajoyment Ineulgence ot pleasure end sinc none of she impugned enacts had sug to tax any sevky end nce the lrpugned enactments sought to ay sors ar lorries wor eld trot the ald ahs Tox om Lotures es, 1995, AndaraProcesh Tax 97 Liles Act 1987 and Wen Bengal Linury Tex Ac, 3994 were Beyond the lalate competence of the State Leaistetre In this connection it was observed, vee para 57, by the Cantttion Bench ofthis Court thet tax ona thing er goods con only be with reference to & txts event bur there is 9 distneion between sens tax dna taxon the tae event. Inthe fist case, oe subject-matter of x Iz te sooes 94 the taxa events ithin the ineisence of the tox onthe goods, Inthe send case the taxable eve isthe sunjeceatir of tax Reel In aur swe, para 57 Sippors tne reoronig given Sy ue hereinabove, Ar tated above, service fox in’ value aodee tax, Value seta i= on account of he ety ee Danning, contusion, naviing ete is an activity, whies provides vaioeaetion a inte ease of marufecturer of goods, wich rac servic tx. In {he prosent cas, tox falls on tho cy whieh is the sblact-mater of serves tot. Im other words, wo am subeutig the word rarica i place of good by aopivng te orineple oF equivalence. Uncer the Ae, Ue Taxable Evert Is each exerese uncetaKen by tNe serviee-prvider in giving aevice On tox Planning, auating, costng etc. ls the sala princple of equvatence whieh equates sevice ‘ax to he Cental Excsa buy, one taxas the brvisen Ezrvces an omer production st goads. See pare 2.14 ofthe recammendations mace by Tax Reforms Cornmitene heaced by br. Chellah when has satec that trom the econame panto view, there wise atterence betncen te tavason ot commodities and taxation of services 35, In she case of Inernatonal Tourist Corporation and ors. v. State of Haryara and ors. report in (1981) 2 SCC 318 che appellants were transport operators, tne Stee of aaryana levied tex b> passengers and goaes uncer the Faryars vassengers ane Gooce Taxation 2ee 952, The appallans ‘ussuoned tha vies of Sacuon 3(3)nsofar as the Ivy of tox on passengers and goods carrying ay thar vshiles plying along the National Highway. It ‘tas urgec on bara oF eve appellants that ‘nera was rothing In tha Constution to prevert Parliament "om combining its soWat to lglslae with respect {mary matters enumerated n Enzies 1 to 96 of Uist! wien power to egislte under try 97 of Use anc, so, Nan the power Uo le slate with resect te tax on passengers anc goods cariad on Natonal ighway was within the exclusive legisatve comaetanca of Pariament and, therefore, secon 32) oF Haryana Passengers ana Gags Taxation Ac, 1952 was beyond te la slative competence of the State vegslat'e. Tis argument was resected by the Divslon Bench ots Court, which took te Wew that before axcsive legislative competence can be la for Parliament by asort to Erary 97 Ust {he lgislasve competence ofthe state Legislature must be establshec. Entry 97 self was spect" in tat @ master can be Brough under that Ey only IPiete nat enumerated In Lets 1 ori nc n the caas of 8 tox, i fig nok mentone In ener of thove Lists, We co nat depute te above proposition “at propostuon fs well ated, This Cou is concarned with te appleaton of the sale pincpe Io this case. Inthe presane mata, ab stata hererabove, the State Legislature is empowered to levy tax cn professions, aces, callngs ec, 06 Such and, thevelore, he word services canpor be read as Synonymous to the wore profession in erty 60. therfore, tax on services 20 ht Tail uncer Enry 60 ist That, service tax woUld fall Unda” ERY Sacyentry 97 of Use 435, Inthe case of Sadan Singh and of. v. New Delhi Munkcgal Committe and ors. repotes In (1989) 4 SCC 155 the appelats claimed 2 roht to engage invading usines on the pavements of Dab ay In tat content, lt was hela by Se Constticn bench ofthis Court that she gurantee under Arle THN(a) extends to practise any profession, orto carty on any occupation, trade or business In that cate the word profesion had been defined to mean fan seeupation carried an by site of specializes quolficavona, persoral guslieaion, traning or skill We &o nat fina ony valence of ths judamen! to the pretent case, As stated above, we are concerned with iferpataton of legiseive heats under the ores Lats In the Seventh Schedule tothe Contttion. Ae stated Sbove, we have to go by the schematic Interpretation of tose entree. Moreover, we afe concerned with @ istnes taxing entes Snd not general enres. Henee, the judement inthe case of Sodan Singh (supra) hes na appcaion so the present cose 237.19 the case f Tamil Nadu Kalyara Marcapem ASS. v. Union af Ina and ots. reported In (2008) 5 SCC 632 = (ts0. 94505 the Division Bench of (Bs Court het thet serves toe is om snirect tox and st be paid onal he services oli oy the Governme't of Inds. has been further held tht the Suid tax 's on service ond not on the serlce-prvider In parograpn 58 hes been observed that under Arte 246) afte Constitution, Parlarmen= Nas ‘dusive powers to make las wth respect to sn ofthe matters enumerated IsList inthe Severe Schedule tothe Conatition. As pe" Atiele 22603), the State Government has exclusive powers to make laws with respect to matcers enumerated in Ust I (State Uist). th the seid udgmerk, ‘has been eld tae sevice tax le mace by Parlament unde» En-y 97 of Ut, tnour view, therefore, the pln Issue Inthe present case 's squarely coveree by Te juogrent ofthis Court the case of Tamil Nadu Kalyara Mandspsm (sup). OF course, In the present case, we are not concerned withthe services Tendored by © Mandap-keeper, who serarms whet (scaled as proney Desed services, i tris tase, me ere cohcerned with serarmence based services Honever bots the eategaies fal within the ambit of te word eervices, 38, In te case of Guarat Ambuja Cements id, and ans, v, Union of Inca ane an, reported in (2005) 4 SCC 214 = (uastaLsusts) it was hel thot $sivea tox isnot a tax goods sr sh passengers butt wes on the tanaporation ill and, therefore, falls under resigcary power of Parfarnent under Entry $7 of the Sevens Schedule tothe Consttlan. 1 was further eld that service tei sat 9 levy 09 Passengers or goats auton te ever of service Inveannecton with tye coroge of gonea and, therefore, was not potsble to hole that te Ack wos inpth and substance with he States exlesve powers uncer Entry 86 of tI, it was hae nat service tox come wioin Cry 97 of List I Inthe present casey $8 sated above, we are concerned th Entry 60 of stl, Ae states above, servis tax is 09 performance based services ise. K's on professional acvie, tax planning, aucnn, costing tke (On each of the exereise uncertaron tax aecores payasl. Therefore, she above Judgment has no apaiatlon 29. nthe case of Bharat Sanchar Naam (tee and ane v sion of Insin and ors: reported! In (2006) 3.SCC 1 = (swemoLscics) the question whlch arose fer determination se"ore ths Court was whether a telephone service (mobile or Fxec) would attract hablty fo service tax It as Held that "der {ovncract the lapity under the service fay there has to exnt what ls clled at goods. Since goods im question con sted of sletromagnete waves otras frequencies, wrien carries voice, messages or sther dat, a felepnare service was nothins bit arervice, We ave not concerned wth cna controversy In the prasant ease, Inthe present case, we are concernad with the legislative compatence of Parlisment to lensiate in reepact sf service wax under enc 57/92¢ of Lst inthe presert case, wa are concerned withthe pered covered by the Fnance Acts of 1994 and 1998. However, armed counsel 0" he Sppellnts hat read upon para 82 of tne aid jusoment in te ease ov Bharat Sancho” Nigam” Lid, (sea) in which fs obrerved trae the resicuary powers oP Parlament under erry 99 of List Leanna: swamp aay te leg siave Enries m she state Ust. Ere Sa Us i oad with article 36(29-8), ters"ore, Eannct be while down by reverring to se resauary provlon. Ae states above wo are concernea wit the application oF he above priniples. in Me Droverc case, a5 stated above, ware concarnee withthe Constutional status of th Ivy. As statee azove, wa Rave to examina the nature of the levy Weave done so ane we have come tothe contusion thatthe wore profession In Entry 60 Ust II canna be made synonymous Win the Word service an, ‘erator, service tax weula fall under ie resauary entry 97 rand with Entry 92C aft” 2003, Ths poston is also mace dear by Article 286A, rset 3y ‘he Constasion (lgnyelgheh Amendment) Ac, 2003, 40. testy, n our view, th jusgment ofthis Court inthe case of KR. Engineering Co, v. Zila Parishad, Barely ané an. reperted in (2980) 3 SOC 330 has ‘to appicnon tothe tacts of te present case. In that case the Court obrerved ‘nat thara wae n basic sietncton between tx 99 Incmre and 829s On {Cteumstances snd property theres no carn, there can be no Income tae In conras,nsne care of a taxon circumstances an propery tee can bea tax an the foal trn-over of re aszessee from his tage or call'g oF om Rs having an interes >the pope’. I: was Rel hat whereas Envy 49 of Use tetas to taxes on anes and bulcgs, ent 60 relates to taxes on artassions and, tarafore, the tra nature ofthe taxi that care Was Not 2 te fon Income but wa a ta referable to Entry 49 ane Ey 0 of List wae held that tha impugned tax was 2 composite tax, one of he components being we crcumstance, namely the inacil posen of Ue assesses. 1k may be dtl tat In the case of RR. Engineering Co. (supra Ihe valdy of the levy was under chlonge ahd that levy constituted what f called a composts lax. We ca Mot see any Felevance of the Judgment lve case of RR Enaincerng Ca. (supra) to the facts af the presen case. Inthe present case we are not concerned with 8 composite tax. Hence, the judgment of Os Cour the case af RR Engineering Co. (supra has ho relevance Io the Tots ofthe geebant case. Candlsion41. For te above ressons, wo find no merit in Civil Aopeal No. 7128 of 2001 filed by All Indi Federation of Tox Practioners snd ors... We hold tht ailament hae legislate competence 10 levy service tax by Way of imaugred Fnonee Acts of 1994 and 1998 under ary 97 of Ut i on cratered Becountarts, cost accountants and aehiects, We freer hol tat the above postion now stands forti'ed by the Cone tu on (Eghty-igh Amanda") ‘et 2003 which has ineerteg Arete 268A and Emery 92€ 9m en ceariy Inseates tat Er 60 of Us I and Entry 82C of Let operate In etferent spares Fomaver, we mace It clear that before us mare's no challenge to the Constitutional validly ofthe sald Constion (Eigsj-elghth Amendment) Ac, 2003, 42, Acorgingly, the cl appeal e laisse wth no order a6 to costs, Sout eae ‘ita close